I understand, I just disagree. That's not how I envision the implied D&D setting and that's not how the books describe it either. Also, that's not even how I run the game, since my preference is sandbox, either of my own design or adventures that play more like a sandbox. There are a thousand ways of designing settings of which your animistic approach is only one, and it doesn't make everything else "small world", it's just that other "big worlds" are full of humans doing human things. My cities are full of cultists, wizards, guilds, and scheming nobles that players never get to interact with, if they don't want to.
Ok, sure, I agree that not every setting needs to be infused with the supernatural. But as someone else pointed out, if your wizards have familiars then you probably have pings on infernals, celestials, and so forth - to say nothing of what they might have bound in their basement if they are high level. If you suggest that your city isn't usually filled with horrors that would quell even the hearts of brave adventurers, then I suggest that it is you and not me that have departed from D&D's setting expectations. Gygax's random encounter table for urban areas included 10th level wizards, vampires, ghosts, dopplegangers, demons, and devils. The FR which is in practice very urban focused (cities are where the adventure happens, and where the majority of setting detail is lavished) has this in abundance - demon lords imprisoned beneath the city because the city itself was shaped like a magical ward, magical creatures as guardians of the city, beholders as priests, and mind flayers running the thieves guilds. Scenes that are the fantasy equivalent of a Star Wars cantina or Jabba's Palace are perfectly in setting. (And for that matter, the Dungeons and Dragons cartoon maintained this aesthetic.)
So yes, I agree that it's possible to have cities that are 100% human be the norm, and "here be dragons" can apply only to remote locations on the map, and that that is a valid style, but I don't agree that is the normal D&D style at least in the published settings nor do I agree that the fairies haven't been found in the game since at least MM1 for some other reason than a person's desire to include fairy myths in the culture of their game world.
And I don't take it for granted that designers do think everything out. On the contrary, I take it for granted that under the pressures of publishing, they don't get everything right. But appeals to the relative perfection of the publishers are rather beside the point.
The point is that the power only has even minimal meaning when, "there's a dragon somewhere within a mile", is meaningful information. But among other things they seem to forget that in 3e and 4e especially, "Dragon" didn't just mean that big 5 chromatics, but also a host of smaller creatures of the draconic type, few of which need necessarily be rarer than red tailed hawks or black bears. There own published settings and source books seem to argue against the idea that "there's a dragon somewhere within a mile" being meaningful information most of the time.